Wednesday, May 25, 2011

The Ira Sohn Conference is taking place today in New York and features an all-star line-up of hedge fund managers. This post features part 1 of our notes from their presentations. ***Update: We've also posted up part 2 of our notes from Ira Sohn as well.

Part 1:

Erez Kalir / Sabretooth Capital: His pick was a long of MBIA (MBI) as a 'favorably asymmetric' play. His presentation was entitled, "Economic Death as a Special Situation." He feels that MBIA has 100%-200% upside with only 30% downside at worst, so the risk/reward skew is favorable.

He also likes Argentina as a compelling investment arena since its default in the early 2000's. In particular, he's looking at energy exploration & production names. He points to stocks like YPF SA (YPF) and Crown Point Ventures (CWV).

On the topic of inflation hedging, Kalir doesn't like gold. In fact, he warned against owning it. He also dislikes shorting treasuries. Instead, he prefers to buy farmland. This stance no doubt echoes the sentiment of Jim Rogers, the ex-Quantum fund manager who has also been a staunch advocate of owning farmland. Additionally, we've detailed how subprime profiteer Michael Burry also bought farmland.

He says S needs to consolidate its two networks starting now with the next generation phones. Singh actually feels like the T-Mobile / AT&T (T) merger is good for Sprint because it removes their largest competitor. Singh notes that the US wireless market could offer defensiveness like utility stocks, but with the added benefit of growth. He thinks S could have 40-70% upside, saying its worth $8-14 per share (currently trading around $6).

TPG-Axon's leading man cited Zhongpin (HOGS) as a compelling investment due to its top line growth and the fact that it's trading at 7x earnings.

Singh also mentioned he thinks that Orkla (OSL: ORK) has a fair value of $65 to $80 as the company was mismanaged and restructuring could unlock value.

Jeff Aronson / Centerbridge Partners: His pick was to go long shares of CIT Group (CIT). This has been a hedge-fund-favorite as some of the largest owners also include Bruce Berkowitz's Fairholme Capital, Howard Marks' Oaktree Capital, David Einhorn's Greenlight Capital, Marc Lasry's Avenue Capital, and Dan Loeb's Third Point. Before Chapter 11, Centerbridge was buying CIT debt. Since then, they've been buying the equity.

Aronson says that the company's intrinsic book value is $59 per share and notes that they have $12 billion in cash on their balance sheet. He highlights that CIT has publicly stated it could buy a retail bank (whose deposits would boost earnings). As a takeout candidate, Centerbridge thinks CIT could be worth as much as $65 (shares trade around $41 currently.)

Robert Howard / KKR: Howard (representing KKR's new equity team) pitched shares of Wabco (WBC), a company that produces anti-lock braking systems among other things. He cites three major trends that WBC can benefit from: cyclical recovery (US & Europe trucking recovery), emerging market growth, as well as tighter safety rules. Howard mentions the company is often overlooked by investors too.

KKR's man also pitched HSN, Inc (HSNI), otherwise known as the Home Shopping Network. He likes their demographic of 30-55 year old women with solid annual income to spend. Howard thinks that John Malone's Liberty Media could make a play for the company too, as he points out that Liberty owns 30% of HSNI and all of QVC, the other major player in the shopping-via-television arena.

Phil Falcone / Harbinger Capital Partners: Falcone talked about his wireless venture, LightSquared. We've covered this play numerous times and while it's not publicly traded yet, Falcone says that it will be some day. Essentially, this is Harbinger's concentrated bet on a 4G network.

Numerous hedge funds have invested in the 'more mobile data usage' theme via various plays. Some have elected to buy the wireless tower operators like American Tower, (AMT), Crown Castle (CCI), and SBA Communications (SBAC). Falcone, on the other hand, has elected to straight up build out his own network as his hedge fund has morphed into a semi-private equity-like fund. He noted that they've accumulated spectrum and are looking at a 4G terrestrial network.

Falcone also likes Crosstex Energy (XTXI). We covered his investment in XTXI back in December and the Harbinger manager likes it due to its complex financial structure. A master limited partnership owns the assets and then XTXI owns that partnership. He drew attention to the fact that this isn't a company that pulls gas out of the ground, but rather a play on gas processing and transmission. Falcone thinks XTXI is worth double what it's trading at now or more (around $9.50 currently).

Jim Chanos / Kynikos Associates: The well-known short-seller attacked alternative energy 'green' plays with a presentation entitled, "Does Solar and Wind = Hot Air?" Chanos said that, "wind is 50% more expensive than natural gas, and solar is 4 times more expensive" and that natural gas prices have essentially shot an "economic arrow" into alternative energy.

In particular, Chanos mentioned Denmark-based Vestas (CPH:VWS or PINK: VWDRY), a company focused on wind power that might be worth looking at for a short.

However, he is most excited about shorting solar power via First Solar (FSLR), a company he believes has outdated technology. Chanos was recently on television talking negatively about this name as well. He points out that Spain and Italy utilize solar power the most. But, the problem there is that the demand is highly subsidized. Also, he points to the management exodus at FSLR as a warning sign for investors to exit shares.

Sunjay Gorawara / Investment Idea Contest Winner: This year's Ira Sohn featured an investment idea contest where the winner was able to present their idea to all attendees. Michael Price introduced the contest winner but while he was talking, he mentioned that Goldman Sachs (GS) could be a buy as it should be worth $100 more than where it currently trades. And in general, he was bullish on financials.

Judges Bill Ackman, David Einhorn, Michael Price, and Joel Greenblatt selected the winning entry of Bridgepoint Education (BPI) from an undergraduate student at Indiana University who will be interning at JP Morgan this summer.

The Ira Sohn Conference is taking place today in New York and features an all-star line-up of hedge fund managers. This post features part 1 of our notes from their presentations. ***Update: We've also posted up part 2 of our notes from Ira Sohn as well.

Part 1:

Erez Kalir / Sabretooth Capital: His pick was a long of MBIA (MBI) as a 'favorably asymmetric' play. His presentation was entitled, "Economic Death as a Special Situation." He feels that MBIA has 100%-200% upside with only 30% downside at worst, so the risk/reward skew is favorable.

He also likes Argentina as a compelling investment arena since its default in the early 2000's. In particular, he's looking at energy exploration & production names. He points to stocks like YPF SA (YPF) and Crown Point Ventures (CWV).

On the topic of inflation hedging, Kalir doesn't like gold. In fact, he warned against owning it. He also dislikes shorting treasuries. Instead, he prefers to buy farmland. This stance no doubt echoes the sentiment of Jim Rogers, the ex-Quantum fund manager who has also been a staunch advocate of owning farmland. Additionally, we've detailed how subprime profiteer Michael Burry also bought farmland.

He says S needs to consolidate its two networks starting now with the next generation phones. Singh actually feels like the T-Mobile / AT&T (T) merger is good for Sprint because it removes their largest competitor. Singh notes that the US wireless market could offer defensiveness like utility stocks, but with the added benefit of growth. He thinks S could have 40-70% upside, saying its worth $8-14 per share (currently trading around $6).

TPG-Axon's leading man cited Zhongpin (HOGS) as a compelling investment due to its top line growth and the fact that it's trading at 7x earnings.

Singh also mentioned he thinks that Orkla (OSL: ORK) has a fair value of $65 to $80 as the company was mismanaged and restructuring could unlock value.

Jeff Aronson / Centerbridge Partners: His pick was to go long shares of CIT Group (CIT). This has been a hedge-fund-favorite as some of the largest owners also include Bruce Berkowitz's Fairholme Capital, Howard Marks' Oaktree Capital, David Einhorn's Greenlight Capital, Marc Lasry's Avenue Capital, and Dan Loeb's Third Point. Before Chapter 11, Centerbridge was buying CIT debt. Since then, they've been buying the equity.

Aronson says that the company's intrinsic book value is $59 per share and notes that they have $12 billion in cash on their balance sheet. He highlights that CIT has publicly stated it could buy a retail bank (whose deposits would boost earnings). As a takeout candidate, Centerbridge thinks CIT could be worth as much as $65 (shares trade around $41 currently.)

Robert Howard / KKR: Howard (representing KKR's new equity team) pitched shares of Wabco (WBC), a company that produces anti-lock braking systems among other things. He cites three major trends that WBC can benefit from: cyclical recovery (US & Europe trucking recovery), emerging market growth, as well as tighter safety rules. Howard mentions the company is often overlooked by investors too.

KKR's man also pitched HSN, Inc (HSNI), otherwise known as the Home Shopping Network. He likes their demographic of 30-55 year old women with solid annual income to spend. Howard thinks that John Malone's Liberty Media could make a play for the company too, as he points out that Liberty owns 30% of HSNI and all of QVC, the other major player in the shopping-via-television arena.

Phil Falcone / Harbinger Capital Partners: Falcone talked about his wireless venture, LightSquared. We've covered this play numerous times and while it's not publicly traded yet, Falcone says that it will be some day. Essentially, this is Harbinger's concentrated bet on a 4G network.

Numerous hedge funds have invested in the 'more mobile data usage' theme via various plays. Some have elected to buy the wireless tower operators like American Tower, (AMT), Crown Castle (CCI), and SBA Communications (SBAC). Falcone, on the other hand, has elected to straight up build out his own network as his hedge fund has morphed into a semi-private equity-like fund. He noted that they've accumulated spectrum and are looking at a 4G terrestrial network.

Falcone also likes Crosstex Energy (XTXI). We covered his investment in XTXI back in December and the Harbinger manager likes it due to its complex financial structure. A master limited partnership owns the assets and then XTXI owns that partnership. He drew attention to the fact that this isn't a company that pulls gas out of the ground, but rather a play on gas processing and transmission. Falcone thinks XTXI is worth double what it's trading at now or more (around $9.50 currently).

Jim Chanos / Kynikos Associates: The well-known short-seller attacked alternative energy 'green' plays with a presentation entitled, "Does Solar and Wind = Hot Air?" Chanos said that, "wind is 50% more expensive than natural gas, and solar is 4 times more expensive" and that natural gas prices have essentially shot an "economic arrow" into alternative energy.

In particular, Chanos mentioned Denmark-based Vestas (CPH:VWS or PINK: VWDRY), a company focused on wind power that might be worth looking at for a short.

However, he is most excited about shorting solar power via First Solar (FSLR), a company he believes has outdated technology. Chanos was recently on television talking negatively about this name as well. He points out that Spain and Italy utilize solar power the most. But, the problem there is that the demand is highly subsidized. Also, he points to the management exodus at FSLR as a warning sign for investors to exit shares.

Sunjay Gorawara / Investment Idea Contest Winner: This year's Ira Sohn featured an investment idea contest where the winner was able to present their idea to all attendees. Michael Price introduced the contest winner but while he was talking, he mentioned that Goldman Sachs (GS) could be a buy as it should be worth $100 more than where it currently trades. And in general, he was bullish on financials.

Judges Bill Ackman, David Einhorn, Michael Price, and Joel Greenblatt selected the winning entry of Bridgepoint Education (BPI) from an undergraduate student at Indiana University who will be interning at JP Morgan this summer.

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